Correlation Between First Watch and Analog Devices
Can any of the company-specific risk be diversified away by investing in both First Watch and Analog Devices at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining First Watch and Analog Devices into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Watch Restaurant and Analog Devices, you can compare the effects of market volatilities on First Watch and Analog Devices and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in First Watch with a short position of Analog Devices. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Watch and Analog Devices.
Diversification Opportunities for First Watch and Analog Devices
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and Analog is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding First Watch Restaurant and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices and First Watch is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on First Watch Restaurant are associated (or correlated) with Analog Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices has no effect on the direction of First Watch i.e., First Watch and Analog Devices go up and down completely randomly.
Pair Corralation between First Watch and Analog Devices
Given the investment horizon of 90 days First Watch is expected to generate 2.27 times less return on investment than Analog Devices. In addition to that, First Watch is 1.39 times more volatile than Analog Devices. It trades about 0.01 of its total potential returns per unit of risk. Analog Devices is currently generating about 0.05 per unit of volatility. If you would invest 18,202 in Analog Devices on September 2, 2024 and sell it today you would earn a total of 3,603 from holding Analog Devices or generate 19.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Watch Restaurant vs. Analog Devices
Performance |
| Timeline |
| First Watch Restaurant |
| Analog Devices |
First Watch and Analog Devices Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Watch and Analog Devices
The main advantage of trading using opposite First Watch and Analog Devices positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Watch position performs unexpectedly, Analog Devices can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Analog Devices will offset losses from the drop in Analog Devices' long position.The idea behind First Watch Restaurant and Analog Devices pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Analog Devices vs. NXP Semiconductors NV | Analog Devices vs. Qualcomm Incorporated | Analog Devices vs. Broadcom | Analog Devices vs. Microchip Technology |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Global Correlations module to find global opportunities by holding instruments from different markets.
Other Complementary Tools
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Fundamental Analysis View fundamental data based on most recent published financial statements |